U.S. Office Sector Continues on Positive Trajectory, Despite Weak U.S. Economy, According to Cassidy Turley Chief Economist

Published on October 06, 2011

WASHINGTON, DC - The U.S. office sector continues to show improving office leasing fundamentals, despite the sustained economic slowdown, according to the Office Trends Report published by Cassidy Turley, a leading commercial real estate services provider in the U.S. In fact, this sector is trending towards recovery, as net demand for office space registered at 14.9 million square feet in the third quarter of 2011, the largest quarterly gain in more than four years.

“What this report shows is that even in the most tenuous economic environment, we can have sectors and local markets that remain healthy and growing,” said Kevin Thorpe, Chief Economist, Cassidy Turley.  “Over the last six to nine months, everything that seemingly could have gone wrong in this recovery did go wrong, and still, businesses had enough confidence to expand into more office space.”  

Investment sales, however, clearly slowed in the summer months of July and August 2011. After averaging $5.8 billion in closed transactions in both May and June, sales decelerated to $4.0 billion in July and slid further to $3.8 billion in August 2011. Current economic indicators suggest a continued, but slow U.S. recovery, although the risk of a near-term recession is at 41 percent, as the European financial crisis worsens.

“Given the elevated risks, there has been a noticeable resurgence in demand for core/safe assets, accompanied by a renewed fear related to value-add assets.  With the latest drop in treasury yields, core asset pricing in all markets - major, secondary and tertiary - could very well continue to surprise on the upside,” said Kevin Thorpe. 

Following are key highlights in Cassidy Turley’s U.S. Office Trends Report:

  • Although 54 out of 82 markets recorded positive gains in the third quarter of 2011, these gains were largely powered by significant increases in markets located in Texas and New York.
  • The top five demand markets in the third quarter of 2011 include New York City (+2.4 million square feet), Houston (+984,000 square feet), Austin (+930,000 square feet), Long Island (+771,000 square feet) and Dallas (+740,000 square feet). 
  • Average asking rents inched up 4 cents in the third quarter of 2011 to $21.39. 
  • Projects under construction increased from 36.2 million square feet in the second quarter of 2011 to 38.9 million square feet in the third quarter of 2011.

Mr. Thorpe added, “The most imminent threat to a full U.S. recovery is the European sovereign debt crisis, which is worsening.  In gauging where the U.S. office sector goes from here, all eyes need to be transfixed on daily sovereign debt yields, equity markets and policy developments.”

Cassidy Turley’s U.S. Office Trends Report will be available on the company’s website on Friday, October 14, 2011.

About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,400 professionals in more than 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $18 billion in 2010, manages 455 million square feet on behalf of private, institutional and corporate clients and supports more than 25,000 domestic corporate services locations. Cassidy Turley serves owners, investors and occupiers with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. In 2010, the firm enhanced its global service delivery outside of North America through its partnership with GVA. Please visit www.cassidyturley.com for more information about Cassidy Turley.

Maureen Wheeler

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